Reference

Financial institutions have again demonstrated their appetite for
marine terminal properties. The latest example came this month when
Goldman Sachs Infrastructure Partners purchased a 49 percent stake in
Carrix Inc., parent company of SSA Marine and Tideworks Technology.

The announcement came less than a week after the Port Authority of New York and New Jersey approved the sale to a Deutsche Bank subsidiary of Maher Terminals, a family owned company that runs the port's largest marine terminal and is developing a container terminal at Prince Rupert, British Columbia.

Goldman Sachs Infrastructure Partners, a unit of the New York investment bank, paid an undisclosed sum for SSA Marine, which operates port and rail terminal facilities at 120 locations around the world.

SSA Marine's current owners will retain majority ownership and management control while gaining access to the $6.5 billion that Goldman Sachs has available for infrastructure investments. Jon Hemingway, Carrix chief executive, said the company is therefore sheltered from the type of demands that the New York-New Jersey port authority made on Maher Terminals and Deutsche Asset Management's RREEF Alternative Investments. Those companies agreed to jointly commit $136 million for future development of the terminal properties and to reimburse the port for past investments.

"We're not selling the business that owns our leases, and we're not changing management," Hemingway said.

SSA handled 22 million TEUs last year. Its joint venture operations in Los Angeles-Long Beach with China Ocean Shipping Co., Mediterranean Shipping Co. and Matson are considered its trophy properties in terms of cargo volume and growth potential. SSA is also one of the largest terminal operators in the Pacific Northwest, with a facility in Seattle and plans to build a $300 million container terminal in Tacoma.

SSA also has significant overseas developments, including marine terminals in Panama, Mexico and Vietnam. Some industry analysts see even higher margins for terminal operators that venture into developing markets such as Mexico and Vietnam, given the lower land and labor costs.

Whether the terminals are located in the U.S. or overseas, institutional investors are attracted by two economic factors. The terminal industry generally produces long-term, stable revenue, and the relative scarcity of waterfront land provides an effective barrier to entry that limits competition.

During the last two years, the high valuations of port properties have made it difficult for terminal operators to resist offers from institutional investors willing to pay multiples of 20 to 30 times earnings before taxes. When political pressure forced Dubai-based DP World to sell the U.S. assets it acquired with its purchase last year of P&O Ports, it was able to sell those U.S. holdings to AIG's global investment arm for a price reported to be more than $1 billion.

AIG is also purchasing Marine Terminals Corp., a family owned San Francisco company whose strongest presence is on the West Coast. And earlier this year, the Ontario Teachers' Pension Plan purchased marine terminals in the U.S. and Canada for $2.35 million from OOIL, parent company of Orient Overseas Container Line. In yet another deal, Macquarie Infrastructure Partners purchased marine terminals in Halifax and Vancouver, British Columbia.

Hemingway said he is pleased with the Goldman Sachs investment because it allows the company's owners to retain control. He said the owners of SSA Marine have an emotional stake in the industry.